Chicago absorbs like a sponge

Much to developers' pleasure, Chicagoland tenants continue to gobble up industrial space at a near-record pace.

In North Aurora, Ill., Itasca, Ill.-based AMLI Commercial Properties Trust has sold a 20.9-acre parcel to locally based Euclid Beverage for a 200,000 sq. ft. build-to-suit. Locally based Darwin Realty represented Euclid. Grubb & Ellis is the land-sale agent for AMLI.

Also in Chicago's western suburbs, the western regional office of Atlanta-based Industrial Developments International has leased two buildings totaling 282,000 sq. ft. In Carol Stream, locally based Heads & Threads International LLC has leased 151,111 sq. ft. at Carol Stream Business Park. The local office of CB Richard Ellis represented IDI, while locally based NAI Hiffman represented Heads & Threads.

Not to be outdone, the downtown and suburban Chicago offices of Cushman & Wakefield have closed a pair of 100,000 sq. ft.-plus transactions. Cushman & Wakefield's suburban office represented Duke-Weeks in its lease of 100,560 sq. ft. in Bolingbrook, Ill., to Oak Brook, Ill.-based Elkay Manufacturing Corp. Locally based Epic/Savage represented Elkay, which is expanding in the Chicago area.

The new three L's: Logistics, labor, location Brandishing a stick, I once chased Barry Hibbard, director of leasing at Tejon Ranch Co., through a Newport Beach, Calif., restaurant, so it's little wonder that he dodged me all summer. Actually, Barry was waiting for Tejon Ranch to close a deal with IKEA that would bring one of the largest industrial developments in California to Kern County, Tejon Ranch's home north of Los Angeles County. With an 80-acre parcel and a 1.8 million sq. ft. distribution center on the line, Barry, understandably, thought it might be best to wait until the deal closed, especially since IKEA is Tejon Ranch's first tenant.

"The biggest challenge was just the size of it, and the speed that they wanted to move on everything," Hibbard says. "It was a challenge for us, being our first project and of such magnitude. It really dictated how the rest of the park was going to go."

Finally, at the end of September, the deal closed, and construction began on the Swedish furniture manufacturer's distribution center, which will serve the entire West Coast, from San Diego to Vancouver. The deal and Tejon Ranch's amenities place the Tejon Ranch Complex - once 350 acres of prime agricultural land - on the map for Southern California and West Coast distribution.

Hibbard points to two important draws for Tejon Industrial Complex, a location on Interstate 5, which was recently widened from four lanes to eight through Kern County, and the Central Valley's labor pool, which goes hand-in-hand with a cost of living vastly below many parts of the state. The seasonal shifts of the Central Valley's agricultural-based economy can leave the region with California's highest unemployment rates.

Because the area is home to some of the most sophisticated farming on the planet, it's conceivable that thousands of workers qualified for warehousing and distribution jobs - forklift operators, general laborers, etc. - could be on the market at any given time, Hibbard says. Applicants literally lined up out the door for the 250 jobs at Tejon Industrial Complex's on-site Petro Travel Plaza. That's not a situation you're likely to find in Los Angeles, San Diego or the San Francisco Bay Area, especially for $8-an-hour jobs. To continue to draw employees, Tejon Ranch is offering training and low-cost daycare for employees at Tejon Ranch Industrial Complex, Hibbard says.

After labor and transportation, other costs figure in to Kern County's allure. Hibbard says that Tejon Ranch Co. can develop industrial/distribution buildings for less than 50 cents per sq. ft., compared with about $1 per sq. ft. in the Inland Empire, where large tracts of developable land are increasingly scarce. Also, the 150-year-old Tejon Ranch Co. is Kern County's largest landowner (a total of 270,000 acres in Los Angeles and Kern counties), and its largest taxpayer. If the largest taxpayer needs a little assistance getting a deal done, the local government is motivated to help move matters along, especially in a region that needs economic development more than, say, Los Angeles County.

Such extensive land holdings also give the company flexibility in assembling deals. Because of the company's size and age, it also has extensive water rights, a key factor in California development.

"It used to be location, location, location," Hibbard says. "Now, it's logistics, labor, location. When you consider the new three L's, we're a good alternative."